Financial Action Task Force

  • Category
    Economy
  • Published
    28th Feb, 2019

Context

During the Financial Action Task Force (FATF) Week in Paris, India had lobbied hard to get the global financial body to blacklist Pakistan for non-compliance in curbing terror financing.

About

More on news

  • Indian security agencies have prepared a dossier to show the culpability of Pakistan in the Pulwama terror strike, which was the worst such attack in J&K in decades.
  • Pakistan was placed on the 'grey list' in June last year and was lobbying hard to be removed from this list at the meeting.
  • Pakistan has to complete its action plan until May 2019. If the country does not meet the targets by October, it could be blacklisted.

FATF

  • It was established in July 1989 by a Group of Seven (G-7) Summit in Paris, initially to examine and develop measures to combat money laundering.
  • In October 2001, the FATF expanded its mandate to incorporate efforts to combat terrorist financing, in addition to money laundering.
  • Since its inception, the FATF has operated under a fixed life-span, requiring a specific decision by its Ministers to continue.
  • The current mandate of the FATF (2012-2020) was adopted at a Ministerial meeting in April 2012.
  • Its secretariat is housed administratively at the OECD.
  • FATF was not formed as a formal international organisation. Rather, the FATF is a task force composed of member governments who agree to fund the FATF on temporary basis with specific goals and projects.

Objectives of the FATF:

  • To set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system.
  • To monitor countries' progress in implementing the FATF Recommendations; reviews money laundering and terrorist financing techniques and counter-measures;
  • To promote the adoption and implementation of the FATF Recommendations globally.

How many countries are there in the FATF?

  • The FATF, which reportedly comprises 36 countries and two regional organisations (European Commission and Gulf Cooperation Council), works to identify national-level vulnerabilities with the aim of protecting the international financial system from misuse.

What are the Black List and Grey List?

Those are two types of list that FATF maintains.

  • Black list is given to the countries that FATF considers as uncooperative tax havens. These countries are known as Non-Cooperative Countries or Territories (NCCTs).
  • Grey list is a warning given to the country that it might come in Black list. But even when a country comes under Grey list it faces many problems like :
    • Problem in getting loans
    • Economic sanctions
    • Reduction in trade.
X

© 2020 Basix Education Pvt. Ltd. All Rights Reserved